About 20 states have passed laws to regulate private companies that compile and sell credit information. Others are considering such bills. But measures pending in Congress could supercede all the state efforts. Unfortunately, the federal legislation may be weaker than what many states have on the books.
Complaints about mistakes in credit reports -- and the difficulty in getting them corrected -- have led to both the state action and possible federal regulation. The states have moved faster.Vermont has just enacted the most strict consumer credit law in the nation, spurred by a mistake last year when TRW, one of the big three national credit reporting firms, erroneously listed property tax bills for some 3,000 Vermonters as tax liens.
About the same time as that mistake, a lawsuit by 19 states charged TRW with damaging people's credit rating by having wrong information in their credit files or by confusing similar names. The lawsuit was settled about six months ago after TRW promised improvements.
While there is a clear need for consumer-protection policies and regulations dealing with credit rating companies, those firms can have a difficult time complying with a hodgepodge of different state laws.
Vermont's new law, for example, requires more than any other state, including supplying consumers with one free copy per year of his or her credit report. It also requires credit rating companies to get the consumer's permission before releasing a credit report to someone else.
Such tough standards, if not included in any new federal law, would be eliminated, since credit companies want consumer safeguards to be national in character. That is a reasonable request.
But in meeting that request, the federal law should not be watered down so that it simply allows credit firms to avoid the tough state laws and leaves consumers without the protection they deserve.
Consumer groups already are upset that the proposed legislation in Congress would remove regulations prohibiting credit reporting firms from providing information to direct marketers.
National laws to regulate credit reporting firms? Fine. But in the haste to accommodate credit companies, let's not make such laws so weak and flabby that they are worse than no laws at all -- while leaving states unable to provide better protection on their own.